Friday is shaping up busy in news releases. Among others, announcements in US include Annualised GDP numbers and Core PCE Price Index. Nobody expects any shocking news, so the figures themselves shouldn’t surprise many people. What could, though, will be response to them. Now, I’m not in business of predicting economic numbers and don’t know what will come up, but it is very possible the currencies will move more than warranted. After all, yesterday was such a nothing day, that the US session might well bring some surprises. Look for strong moves in USD and JPY. And lets not forget GDP data from Canada today. With CAD being such a high flier lately, strong reaction is very possible.

We already had something interesting coming from Japan- employment data and numbers. They are not good. The government said  unemployment rate worsened to 5.4% from 5.2% in May. The total number of jobless in June jumped 31 percent from a year earlier to 3.48 million, according to the Ministry of Internal Affairs and Communications. This a serious increase. Number of employed Japanese fell 2.3% to 63 million. The unemployment rate is the worst in 6years, when it reached 5.4 % in June 2003 after hitting a record 5.5% a month earlier. Currently economists predict a new record high in the months to come.

This brings another market pressure. Deflation in Japan once again resurfaced as a serious threat.  One of the pieces of data released was the Consumer Price Index, which fell a record 1.7 percent in June from a year earlier.  Intuitively, lower prices may seem like a good thing, but deflation can seriously slow down growth by depressing company profits and causing consumers to postpone purchases. This, in turn, leads  to production and wage cuts. It can also increase debt burdens. The nationwide core CPI, which doesn’t include fresh food prices, has dropped for four straight months, the worst  decline since the officials began compiling comparable data in 1971.

Last few days I presented some of my Yen trades on these pages. Including a buy of EUR-JPY in Forex hedging post.  Idea was to go long this pair at 134.61 with about 100 pips target. Frankly, it was a little ambitious, given the “freeze” most crosses showed yesterday. Well, maybe not that bad, there was not much conviction, either. Earlier today, though, this pair settled in nice, steady up move.

Shortly ago EUR-JPY came within 4 pips of the objective. When it is so close, and I start seeing signs of weakening move, position is typically closed. That’s what happened her. Price started to slide and I managed to get with 78 pips gain. Short of the target, but I still like it. Almost immediately price fell by over 100 pips. So, the volatility is here today and I think it will stay with us for the rest of the day.

I just looked at a live chart and  the price touched 100 SMA. In my mind there is going to be reaction there, so I went long again at 134.46. Plan is for 80 pips, but I will close this today, before markets shut down for the week, if objective is not met. Chart for this trade will be posted either tomorrow or Sunday. At that time I will also take another look at Canadian Dollar. Right now I fully expect to be trying to buy EUR-CAD again next week. Hopefully, with better results.

Mike K.